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What the 2014 election means for patent reform

Without a Republican majority in the Senate last year, Congress was unable to pass patent reform legislation. The primary contender, as we previously reported, was the Innovation Act, sponsored by House Judiciary Committee Chairman Rep. Bob Goodlatte (R-VA). That bill passed the House with an overwhelming majority vote of 325-91 only to get stalled in the Democratic-led Senate.(For a detailed discussion on Arent Fox’s reporting of the Innovation Act, click here.) At the time, many speculated that Senate Majority Leader Harry Reid (D-NV) was reluctant to permit Senate floor consideration of patent reform legislation that was opposed by trial lawyers and elements of the pharmaceutical industry. Senate Judiciary Committee Chairman Patrick Leahy (D-VT) had worked closely with a bipartisan group of committee members to fashion a possible compromise bill as an alternative to the House-passed legislation. However, in view of problems within his committee and the concerns of the Majority Leader, Chairman Leahy pulled his draft bill from the committee agenda this spring and effectively ended the reform process for this Congress.

This situation may change with a Republican majority in Senate, since the likely incoming Senate Judiciary Committee Chairman, Sen. Chuck Grassley (R-IA), was active on patent reform last year and because incoming Senate Majority Leader Mitch McConnell (R-KY) does not necessarily share Sen. Reid’s views on the subject.

One of the prominent and controversial features of the House-passed legislation was the attorney fee-shifting clause. That provision would allow district courts discretion to award attorneys’ fees to the winning party if the other side’s claims were not “substantially justified.” Some observers believed that this legislation would have a chilling effect on Non-Practicing Entity (NPE) litigation.

In addition to enjoying Republican support, the Innovation Act received strong support from the high tech industry (especially the software industry), but not other sectors such as the biotechnology or pharmaceutical industries. The bill also included other features such as limiting infringement discovery, requiring more detailed pleadings, and forcing patent owners to file transparent ownership documents with the USPTO to apprise the public of the entities buying, selling, and trading in patents on the public market. The House bill, and the Senate draft that did not move through committee, were both designed to build upon the 2011 law called the America Invents Act (AIA), which was the most comprehensive patent legislation enacted in the prior 60 years. The AIA includes the defense popularinter partes review (IPR) procedure administered by the relatively new Patent Trial and Appeals Board (PTAB), which (Ret.) Judge Randall Rader of the Federal Circuit called the “death squad” for patents.

Now that the Republicans control the Senate, as well as the House, Congress may see a renewed interest in passing additional patent legislation. One might question, however, whether the courts have already taken care of patent reform and whether, and in what form, additional legislation is actually needed. Since this legislation has been debated in Congress, the US Supreme Court in Octane Fitness v. Icon Health & Fitness radically altered the law for attorney fee shifting in patent cases by empowering District Courts with discretion to award attorneys’ fees in unreasonable cases. More recently, the Supreme Court’s decision in Alice Corp., which invalidated certain business method claims as “abstract,” has led to a surge in decisions invalidating certain business method patents as unpatentable subject matter under Section 101 of the Patent Act.

Therefore, if patent legislation is again considered in Congress, it will rightly have to take into account the changes in law that have already come into effect by recent federal court and PTAB decisions. These will be issues for House Chairman Bob Goodlatte (R-VA) and his new Senate counterpart, incoming Chairman Grassley, to work on in the coming months.

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